56th GST Council: The Centre’s next-gen GST reform proposal of having just two tax slabs of 5 and 18 per cent by moving products from the current 12 and 28 per cent to lower rates is on the agenda.
The 56th GST Council two-day meeting, chaired by Union Finance Minister Nirmala Sitharaman and comprising ministers from all states, is underway. The overhaul of the Goods and Services Tax (GST) to lower tax rates on daily use items will be considered during the meeting. The Centre’s next-gen GST reform proposal of having just two tax slabs of 5 and 18 per cent by moving products from the current 12 and 28 per cent to lower rates is on the agenda. A special 40 per cent rate has been proposed to be levied on a select few items.
Opposition-Ruled States Seek Compensationย ย
While the pruning of the tax slabs and the resultant expected fall in prices have been welcomed, finance ministers of opposition-ruled states has decided to seek compensation for any loss of the revenue that may occur because of the rejig.
Eight opposition-ruled states – Himachal Pradesh, Jharkhand, Karnataka, Kerala, Punjab, Tamil Nadu, Telangana and West Bengal – had met last week to decide on how their revenues could be protected once the 12 and 28 per cent slabs are removed.
Four-tier GST Slab
A 4-tier GST structure of 5, 12, 18 and 28 per cent was implemented from July 1, 2017, when the Centre and states agreed to subsume most of their taxes like excise duty and VAT into one uniform tax.ย A compensation cess in the range of 1 to 290 per cent is levied on luxury and demerit goods to create a revenue pool for compensating states for the loss of revenue occurring from the exercise.
These Items To Get Cheaperย
Most of the commonly used food items like ghee, nuts, drinking water (20 litres), non-aerated drinks, namkeen, certain footwear and apparel, medicines and medical devices are likely to move from a 12 per cent to a 5 per cent tax slab. Everyday use items ranging from pencils, bicycles, umbrellas to hair pins may also move to 5 per cent slab.